DBGI

Greetings. Welcome to the Digital Brands Group Third Quarter 2024 Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, John McNamara. You may begin.

Thank you. Good afternoon, everyone, and welcome again to the Digital Brands 2024 third quarter earnings conference call and webcast. With us on the line from management is Hil Davis, Chief Executive Officer, who will provide an overview of the quarter. At the end of the prepared remarks, Hill will respond to a few questions that were submitted prior to the conference call. As usual, we would remind you all that this call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended. This may include statements regarding the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth in these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. With that, I will now turn the call over to Hil Davis. Go ahead, Hil.

Good afternoon, and thank you, John. As we stated in our press release, our third quarter was the last quarter we significantly focused on paying down debt and liabilities given the soft macro economy and the overhang of the election. Starting in October this year, we transitioned from cleaning up the balance sheet to focusing on increasing top line growth. As we stated in our press release yesterday, we partnered with VAYNERCOMMERCE to drive digital revenue. This partnership has already led to a 34% increase in daily digital revenues and a 7% increase in average order volume during the 17-day period, which was October 22 through November 7. And then this was prior to the 30 days they took over, which was September 22 to October 21. We believe these results reinforce the positive value of our partnership with VAYNERCOMMERCE. We intend to add the agency's e-mail and SMS campaigns, which is text messaging campaign services starting this week. This partnership was the first step in a multi-step growth strategy, coupled with the launch of AVO. Other initiatives to this partnership, which we are in the process of launching or will launch are as follows: adding several apps to our Shopify platform that they have set increased conversion rates of their other brands they work with by 20% plus; selling on other digital platforms such as Amazon and TikTok, which we plan to launch in Q1; launching influencer campaigns. This is going to be a big focus for us, partnering with influencers and leveraging different platforms. And with VaynerMedia buyer side, there's a lot of reception now for that. Launching limited edition product capsules every month that are only available online in small quantities that have exclusive pricing, fabrics and design. And this really follows the sneaker industry in terms of the shoe drops. So we plan to focus on that for all the brands for our DTC channel. Please note that we had none of these before. And going forward, we will have all of these. There are also other major initiatives in the works along with these noted above, which we will announce as we get closer to launching those. So I think what I want everyone to really take away from this is Q3, you had probably one of the worst macro-economies, you had the election, and then you had us focusing on paying back debt and liabilities. And that's really important because we feel, based on everything we see now that, that was the bottom. And it was intentional because it did not make sense based on our conversations with other companies to invest heavily in digital marketing. And as everyone's noted, which I'll talk about here in a second, the wholesale and the consumer has been soft. So not only in addition to these that's important, the company also will benefit by an increase of over $4.5 million in earnings in 2025 that is associated with amortized non-cash expenses, which includes Stateside's goodwill concluding at the end of year -- at the end of this year as well as $3.1 million in amortized interest expense, which was also sum of cash ending at this end of this year. So again, next year, we'll already see a benefit of $4.5 million in earnings associated with those two items. In addition to that, we took a meaningful wholesale price increase at Sundry, which has met zero resistance, and that alone should add more than $500,000 a year to gross margins. And we know that it's hit zero resistance because we've been selling wholesale for spring into the market already. As you can see, this really reflects a major inflection point in our business as we have shifted from cleaning up the balance sheet into a growth mode. Given majority of our cash was being used to pay down debt and liabilities, we could not invest properly in growth. Even if we invested in growth, it would have been in a weak macro consumer market that is impacting all retailers from Home Depot to Levi's to lululemon to all the fast fashion brands, and even has impacted all the luxury brands. So any growth investment during the last nine months would have been met with a soft consumer market based on the publicly reported results of these brands. Now that the election is behind us, and we feel that the consumer has stabilized and the balance sheet has been meaningfully cleaned up, we feel now is the right time to make this transition into growth. Before we could do that, we needed the right digital partner, and we needed the cash flow in order to do this. We believe that we found the right digital partner VAYNERCOMMERCE, and we also now have the cash flow to invest in the growth. We are extremely excited to move into this transition and are already excited about the results we have seen thus far with only one piece of the growth initiative being rolled out with others coming starting this week and going forward. So with that, let's discuss the third quarter results. Net revenues were $2.4 million, compared to $3.3 million a year ago. I think the important thing here is we decided to walk away from our largest wholesale account due to a single-digit gross margin before the required additional expenses to manage that account, which include making multiple samples because they wanted their own sizing. This meant that this account was net negative in cash contribution. So while it added revenue, we lost money on it. So going forward, we will lose this revenue, but we will increase our profitability. This was over $800,000 of the difference in the year-over-year difference. And I think that's really important to understand is that while it impacted revenue, it did not -- it actually improved profitability and will continue to improve profitability as we move through next year. Net revenues were also negatively impacted by limited digital advertising spend, which we've discussed, which resulted in low e-commerce revenue. And also as we discussed, since adding VAYNERCOMMERCE, we've seen a meaningful increase in that digital revenue, and that's with them just A/B testing product right now with content that we had. We're reshooting a lot of content with them next month, and they are getting a good gauge on what types of ads are working best. So we will shoot that content best into -- we'll shoot the content based on what ads are performing best, and we just had a call about that today. Gross profit margins were 46% compared to 52.3% a year ago. The biggest factor in this decline is actually the fixed cost associated with our gross margins, which includes the entire warehouse rent and all the labor expenses associated with it, our pattern makers and sewers and as well as some design member experiences. So keep that in mind. There's a lot of fixed costs in our gross profit margin, so these will naturally lift as our revenue lift, and that's really important to understand is that fixed cost nature. Gross profit margins were negatively impacted by lower digital revenue associated with the limited digital advertising revenue in the quarter. Gross profit in dollars was $1.1 million compared to $1.7 million a year ago. G&A expenses decreased $1.3 million to $2.4 million, compared to $3.7 million a year ago. That is a significant reduction year-over-year to a tune of $1.3 million. Also included in our G&A was $1.6 million in non-cash expenses, which includes goodwill expenses for the brands we've acquired, depreciation and other items like that. G&A, also, expenses declined from the last quarter by over $500,000. So as you can see, we continue to get leverage on our cost savings and the intentional way we're managing the expenses. And now that we're going back into growth mode, we're excited to see what's going to happen there. Sales and marketing expenses were $655,000, compared to $1.2 million a year ago. Sales and marketing expenses ratio was 26.9%, compared to 35.3% a year ago. Please note that the majority of the sales and marketing expenses is the marketing team. And as we stated, we have now outsourced our sales and marketing team to VAYNERCOMMERCE. So you will see this cost go down as well and supplement that with increased digital dollars going forward. Net loss was $3.5 million compared to a net loss of $5.4 million a year ago. This includes a $1.6 million loss in non-cash expenses. And to that point, as you can tell, even though our revenues were lower, our net loss was significantly lower. A lot of it attributable to the fact that that wholesale account was highly negative. Starting in Q1 next year, our interest expense will decline to $105,000 from over $700,000 a quarter due to the completion of the amortization of the interest expense debt at year-end. This means the annual benefit of this interest expense being fully amortized is $3.1 million a year that will benefit net earnings in fiscal 2025. Net loss per diluted share was $1.63 compared to a net loss of $14.55 a year ago, a significant increase. So in closing, what I'd like to say, and I think it's really important is that we're really excited about this transition that we're making from having to really focus on cleaning up the balance sheet and a really difficult macro market into now more of growth. We have a strong partner in VAYNERCOMMERCE and are already experiencing better results. And these results are only from the digital advertising channel only and do not include our text messaging, our e-mail, our influencer partnerships, our monthly capital collection and other initiatives we have not announced but are finalizing. In addition to that, 2025 will experience a $4.5 million earnings benefit versus 2024. This is a significant lift to 2025's earnings and that is before any benefit from the growth initiatives noted above. That concludes our third quarter 2024 conference call.

As we stated, we paid back $1.3 million in that convertible debt. So the company has no convertible debt left on its balance sheet. And the only debt that we have is longer-term debt and that is [indiscernible] debt as well. So that we've really cleared that overhang, which is really important because that pressure is not there and that's going to allow us to really focus on growing this moving forward. Also, there was a question about just the Vayner relationship and how it came about and what it looks like. So we knew VaynerMedia because they had reached out to us but felt like we were too small and didn't have enough going on to make it happen. We followed back up with them recently, especially with the launch of AVO and as they dug in to what we're doing, they really got excited about. In fact, at first, they had mentioned that they probably weren't right for us. But then as we circled back, they dug in a little bit and said, you know what, this makes a lot of sense, even in the tune of the fact that it's a heavily incentivized percentage of a revenue deal. So they're putting their money where their mouth is. And for that perspective, on every call when we do a couple of calls a week, we have 15 people from their team on the call. So they are highly invested in us. And I think that's really important. And I'm just really excited about what we can do because we have a pure performance marketing group that's worked with a lot of brands, that has scaled a lot of brands, now fully focused on this. There's no way we could replicate this niche, if you will, in terms of depth, and width and knowledge in any way on our own without spending millions of dollars. And so we're excited about what that is and what that's going to bring. And we're really excited about creating some really amazing content starting in December and going forward. And just them really taking this over. I mean, right now, we've just started spending a little bit more than what we've been spending. I mean, we're only spending about $1,500 a day, that's it, and we're already seeing a meaningful lift. So they're A/B testing the results and they're seeing what works best. And based on that, we plan to shoot content in the first two weeks of December based on the type of results that are working the best. And we plan to shoot that with influencers and really lean into the influencer-heavy world. We're excited about what that can bring. And then, finally, I just want to really iterate that this Q2 was the revenue decline, was really driven by a wholesale brand that was actually net negative for us on the operation margin. It was about 7% gross margin and net negative on the operating margin. So while the revenue took a massive hit, the gross margin will increase significantly as will -- and when I say gross margins, I mean, absolutely dollars flowing plus the price increase at Sundry. And so we're excited about that. And we've actually had several majors reach out to us that we're in discussions with to add Sundry and Stateside, too. And that's another reason we decided to drop them is that these other majors have just as big of a reach with much better margins and much higher quality brand name associated with them. So we're excited about where that is as well.

So that concludes the quarterly conference call. I appreciate everyone's time and everyone have a nice day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Digital Brands Group Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, John McNamara of Investor Relations. You may begin.

Thank you. Good afternoon, everyone, and thank you for joining us on the Digital Brands Group 2024 second quarter earnings conference call and webcast. With us on the line from management this afternoon is Hil Davis, Chief Executive Officer. Hill will begin the call with an overview of the quarter, and then we will open up the line for questions. As usual, we would remind you that this call may contain forward-looking statements, as defined in Section 27A of the Securities Act of 1933 as amended. This may include statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those set forth in these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. With that, I will turn -- now turn the call over to Hil Davis. Go ahead, Hil. Hil, is your phone on mute?

Hil, your line is live. Okay. We still have Hil's line connected. I can try to dial back out to him just one moment.

Hi. Sorry about that. Can everyone hear me okay?

Yes.

All right. Sorry about that. Good afternoon, everyone, and welcome to our second quarter conference call. I think the first thing I want to highlight on today's call is that we paid-off over $5 million in debt and other liabilities during the first half of the year, which is very significant as you can imagine. This was driven by conversations with strategic partners as part of our strategic review. And what they wanted to see us do was start to clean up the balance sheet, which we've done now. And that was an incredibly important attribute for them, especially, as they look at potential opportunities with us. Also I'd like to highlight that we continue to get offers for our NASDAQ shell that are between $3.5 million to $5 million in value plus a percentage of whatever company would be coming in, that's usually $10 million to $20 million. So as you can imagine, there's value in our shell alone. And so one of the things as part of the strategic review process was based on feedback from strategic partners, what was most critical for them to focus on and the debt cleanup, which we did, which was $5 million in debt and other liabilities was a big piece of that. As part of that too, just through our Sundry acquisition and basically focusing on those synergies, we've lowered our G&A expenses by $4.5 million during the first-six months. We're going to continue to see those savings in the back half of the year. And in our conversations with strategic partners that has been incredibly well received. In the private markets as you can imagine, you get your cost to good or your cost down and then any incremental revenue really starts to flow through at a much higher level. And so these were two of the big pieces. We knew the operating leverage would come as we talked about for a while. The big piece and change for us was really clean up the balance sheet, especially, given this environment where the consumer is softer today. I think you've seen a ton of companies report from Home Depot to even Walmart saying they've seen more $100,000 plus household income and you've seen it across Levi's and other apparel companies. For us, we don't have as much exposure to the majors, so we do have one big major department store asking to bring on our brands and another one that is increasing the number of doors we're in. So we're seeing success in the wholesale market. What we've done is, we kind of shifted our direct-to-consumer marketing spend into paying off the debt and the AP per our conversations with the strategic partners and now we're starting to turn that back on and start to ramp. We're just very thoughtful in this environment too because there's no reason to lean into a soft consumer. You just want to manage through this process, which we're doing and focused on that. And despite that, we're still seeing a 2.6 to 2.9 ROAS. So what does that mean? What that means is, for every dollar we spend, we're getting $2.60 and $2.90 in revenue back. So that usually what you -- once you get to about 2x ROAS is when you start to become breakeven. And so that shows you how much room we have now to continue to basically lean in and spend on the marketing side, especially, since we focused the first half of the year on the cleanup and now we're going to start to move into the growth phase again. And again, as we said, we're going to do a strategic review and these were the conversations we've had and this was one of the critical things that they wanted to hear and that's been a big piece of our strategy. And now that we're basically turned digital marketing back on, we're seeing that launch and then we're also seeing incredible sell-through. We had a call with one of our majors two weeks ago and we are in their top five of sell-through. We continue to sell-through really well. They're increasing the number of doors. They're taking products to all doors. And then like I said as well we have another big major that wants to add us, which we will -- we're in talks with to figure that out and onboard them as well sometime. So we're excited about how the product is selling. And really, it was just a strategic decision in the first half of this year to focus on the balance sheet clean up as opposed to the growth based on those conversations. Now that we're through that, we are starting to now work on and look back at to the growth side, especially, on the DTC side as the wholesale though is there as you can see. So we're excited about that and we continue to think that's going to continue to grow. As we also announced a couple of weeks ago, we tested a concept with DSTLD called Build Your Own Bundle and that's been incredibly successful with no digital advertising, zero digital advertising. We saw 114% growth actually, sorry, 150% growth in those -- in that brand by doing Build Your Own Bundle. And what that made us realize that along with looking at brands such as True Classics, Fresh Clean Threads, which are all bundle concepts that have grown incredibly well that there was a major opportunity in the women's category to build the same concept. So we've also been working on that. You're going to see that launch in the next couple of weeks, which we're really excited about. We've been beta testing it with a high success rate and we've already had some stores lean in. We're shipping a big order this week to a store and we're excited about where this brand is going to go and it's based on that but in the women's space. And the nice thing about it is, we can use our current infrastructure to do this. And so there's very little incremental cost. In fact, the fabrics that we're using right now came from the Sundry acquisition that Sundry doesn't sell on wholesale anymore. So we have zero costs on that fabric and it's a great fabric. And what's exciting about that is, you're talking about a $20 T-shirt in women's that is a Nordstrom's quality and we'll be able to -- with a bundle, it'll be $50, but a 3 unit or more bundle, it will be $20 each. And so we're excited to see where that goes given the success of those other brands and especially, our beta test with DSTLD, which is Denim and a more expensive price point to see where that goes. So we've got several growth drivers and then, we've been really focused on cleaning up the balance sheet as we said. So with that, I'm going to get into the numbers. Net revenues were $3.4 million compared to $4.5 million a year ago, that also by the way was peak Sundry before we had to kind of -- we bought them, they had already sold through this period and the brand was in slight decline. So our next two comparisons are going to be a lot easier this year. But more importantly, the volume of that brand, we've doubled the units sold at that brand. The net revenues that we noticed were negatively impacted by no digital advertising spend. And so think about this, if we would have spent $1 million during the quarter at a 2.6 to 2.9 ROAS, you're looking at an incremental $2.6 million to $2.9 million in revenue. Now if we were spending $1 million we'd expect that ROAS to come down to 2x to 2.5 times, but you can see how quickly we can accelerate revenue again when we shift from the debt and other AP (ph) pay down being accounts payable back into a growth phase. And as we noted too, the company has paid over $5 million of debt and other liabilities during the first half of 2024. Our gross profit margins were 45.9% compared to 52% a year ago. The decline in this is all associated with the no digital revenue, very little digital revenue for the quarter. The digital gross profit margin is around 75% to 80%. So you can imagine how that changes when you have the digital revenue go through. Gross profit margin or gross profit dollars was $1.6 million compared to $2.3 million. G&A expenses decreased $1.1 million to $2.9 million compared to $4.1 million a year ago. As we said, that is a significant reduction both in the first quarter and the second quarter and we expect that to continue. Keep in mind, G&A includes $1.8 million in non-cash expenses, which is primarily associated with depreciation and amortization. And of that, over approximately half that will roll-off in the first quarter as the amortization of Stateside acquisition, the goodwill of that will go to zero and they will no longer impact the P&L. Sales and marketing, as you can imagine was lower than a year ago at $615,000 versus $1.1 million again due to no digital advertising, It was 18.1% compared to 24.4% a year ago and we're going to start ramping that back up, as we've cleaned up that balance sheet piece that we were talking about. Net loss was $3.5 million compared to a net loss of $5.7 million a year ago, which excludes a one-time cash benefit of $10.7 million in the year ago period. Including this benefit, net income would have been $5 million a year ago versus a loss of $3.5 million. Net loss per diluted share was $2.08 compared to net income per diluted share of $0.31 a year ago, but please keep in mind that included a $10.7 million benefit from a one-time non-cash gain in the quarter. So in closing, what I want people to realize as they look at these numbers is, the first half of this year was really about cleaning up the balance sheet and especially in the second quarter, and that was driven by the fact that as everyone's reported, the consumer has been soft. So this is the right time to really focus on the balance sheet cleanup versus the growth given what everyone's experiencing. As we shift into the second half of the year, especially, as we move through the election and what everyone is believing will be a rate cut. We will really start to dial that growth marketing dollars back up, especially given we're getting 2.6 to 2.9 ROAS. I can't stress how significant that is. Again, like for every dollar you spend, you want to continue to spend until you get to about 2x ROAS and there's plenty of room there. So you've got significant room on the digital marketing side. You've got wholesale that continues to perform. We're in talks with a major department store about adding the brands. We're also, are launching another licensed brand, Sunnyside by Sundry, where we already have our first order, which we're excited about, which will be significant, licensing revenue on top of our Bailey's licensing revenue. And then finally, we're launching the new brand in the next couple of weeks, the DTC brand that based on the DSTLD results, as well as other brands we believe is a huge growth driver for us. And there's zero incremental cost for us to launch that brand as we can use our current G&A structure, as well as supply chain and finally fabric that we have to really drive that going forward. So you've kind of got what we felt like was an important piece of our strategic review, which was focus on the balance sheet cleanup first, especially given a softer consumer environment, and then start to shift back into significant growth mode as we move forward, especially given the ROAS results and then what we think will be the success of our new brand. So we're excited about where we've been. I know the numbers were a little bit lower, but please keep in mind that was almost all wholesale. There was very little digital. So if we would have focused on putting $1 million or $1.5 million to work in digital, we could have generated significant revenue over that time frame. And we did not -- we focused on clean up the balance sheet because of strategic review because as we reviewed what our NASDAQ shell was worth, as we reviewed what the investors would get for reverse merger, all these different things, there's significant upside that is there. And so as part of this process, that was a very important part of it. So with that, I'll turn it over to Q&A.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Richard Malinski, Private Investor. Please proceed.

Hi. How are you? I'm a recent shareholder of the company. My course is around probably $1.50, $1.60. But I just was curious to find out how do you pay off the $5 million in the debt? Was that cash that was on the balance sheet? Was there an equity line on that? Just curious first how that was paid off.

Yeah. So it's a combination of two things primarily. It was working capital from the business, which we continue to use to pay that down and we'll continue to use. And then secondly except there's -- almost 100% toward that. And then secondly, we did that warrant exchange in May and we used a lot of that. It was $3.3 million before all the fees and everything else. It was approximately $2.8 million after all fees and expenses and that was a piece of it. So it's both working capital as well as that piece.

Okay. My biggest concern is also when you look at the balance sheet, you see the current assets over current liabilities. I like the business that you have and I think what you're saying in the second half could be very exciting for me as a shareholder in the company. But my biggest concern is, are you going to be okay with the capital that you currently have? Or have you publicly disclosed that you're going to be looking to raise more money in the second half of this year to have that growth? Do you have enough at this point?

Yeah. I think we're just taking it week by week. We're looking at everything that's going on and what makes sense and what doesn't make sense. The warrant exchange came out of just kind of an offer out of nowhere and it gave us an opportunity to clean up some stuff. So we'll be proactive where it makes sense. I think the other thing as we look at it is, what do we ever get credit for? We got to start getting credit for something. And so that's especially in talks in the private markets, they look at the business, they look at the baseline business and they feel like, the interesting thing is the valuation we get in the private market seems drastically different than what we get in the public markets to the positive in the private markets, which there shouldn't be such a disassociation between those two markets, especially when it's private values you more than the public.

No, I understand that. But at the end of the day, they do see the last quarter was off, we're still losing money. My biggest concern is that can you go the next six months and prove to Wall Street that, look, what you're discussing publicly, there's a chance it's going to happen. We're going to see a nice ramp up. And now you don't have the debt expense, but I'm just concerned that do you have that capital? If we didn't have to raise money, do you have enough at this point because you did get that warrant money?

Yeah. We can continue to go along this pace. The question is what makes the most sense for the business and that's why we're always reviewing, right? I mean that's why we're always in talks with private investors and looking at all the different options sets, debt, convertible debt, nothing, raising capital, not, it's always it's all very fluid and we're looking at all of it. So I can't answer the question because it's always a point.

Okay, no problem. Yeah. The last thing I'll just mention is just one good thing is that if you do a raise, it's always good to see in size participate in the raise and that was always I'm always interested in that when you in size is participating too. But look, I'm looking forward to the future and seeing you execute on the plan that you discussed. It should be interesting.

Yeah. And I think, just so everyone understands too on the insider, and I agree with that. The problem is because we are in these strategic discussions, we're privy to material non-public information. And so that prevents us from doing anything. So it's kind of a double edged sword, right? Like, it's doing a strategic review and in talks and I mean we get an offer once a week to reverse, right? I mean, there's no in this market, no one can really get public. So the shell is worth a lot of money to people, which is really interesting. We think we have a growth concept and we think we're working. I mean, you look at our -- I guess what we put up almost $7 million in revenue in the first half of the year and we're trading what a fraction of even that. So -- and it's a good idea too, it's sorry, go ahead.

No, here's the good news on your part. Because there's a few shares out there's not many shares outstanding on the company, there was a company like last week. It had it only had like a 1 million shares outstanding called Sealy. Stock was trading below $2 a share and it went up to over $20 in just a couple of days because it was a small float and they came out some good news. So I don't know when that's going to happen, but if you continue to come out with contracts or news, you're going to get caught. I think that someone's going to recognize that, look, this is a small float that has exciting potential and even [indiscernible] is like $1 billion worth of stock. It was amazing. What happened, but it was a small float and people got excited about it. So the small flow is very positive.

Well, there is a cutting edge. Like, it does -- now I don't think we have a lot of institutional investors that are market caps shifting around, but when they do, they do want to see a larger float. Having said that, yeah, we're just going to. It's fine. We're not going to make a decision based on float to your point, right?

No. Like I said, there's so many companies with small floats that have had runs over the last year or so that people love it. For some reason, it's got caught up. So that's an advantage, not a disadvantage. And then when it runs up, then you could raise money at your price. But hopefully, you'll see that soon enough as you announce developments. All right. But I appreciate your time. I know I'm taking up too much time.

That's right. No, I appreciate the questions.

All right. Thank you, [indiscernible]. Thank you very much and good luck.

Thanks.

[Operator Instructions] Up next, we have Timothy Endachter (ph), Private Investor. Timothy, please proceed.

The only question I have -- yeah, I'm here. The only question I have is, I'm not long time investor. I'm not rich. I've dumped up a bunch of money into this thing. What are you going to do to prevent this from RS-ing, from reverse splitting? I mean, are you going to start maybe do you want a stock buyback? Are you going to -- do you have any plan to prevent this from reverse splitting again?

Well, I think all we can do is continue to focus on the fundamentals, right? I mean, that's the thing. It's like it's -- I mean, look at our market cap relative to where we are. It's definitely a dislocation and that's not lost on people in the private markets, right? Because with especially our leverage on our fixed costs, we're $250,000 a month, $300,000 a month in revenue away from being cash flow breakeven. That's not a massive increase in anything, right? It's not like we've got to get up to $100 million in revenue to breakeven. And so we're just going to continue to focus on that. We just kind of felt, the big thing for us is with the [indiscernible] opportunity, the new brand we're launching is there is -- in this market right now, there is value wins. I mean, when Walmart tells you they have more 100,000 plus household income shoppers shopping at Walmart than they've ever seen in their history, that tells you where the consumer is. So we had a decision, do we continue to do what we're doing, which we're going to do or do we also step back and say, hey, how can we participate in this shift that consumers are experiencing? And given that we already have a supply chain, given that we already have fabrics and products, how can we step back and figure out how to take advantage of that? And so that's what we're doing and all that becomes incremental to us. And I think that's what really gets exciting. I mean, you look at our revenue and we've had very little growth capital in a year and a half. It's all going back to service debt and old AP. So imagine as we shift into more of that mode what can happen. So there's not -- I don't know if share buyback is the best use of capital right now versus starting to see where the growth is especially after cleaning up the balance sheet. But we're going to just focus on executing the business and see where it goes and really focus on driving that top line because we're knocking on the door of profitability. It's not very far away and we believe we can achieve it, especially, as we shift from clean up balance sheet to growth, especially post-election. The election creates a lot of hangover when you talk to people. And then I think everyone kind of feels like a Fed rate cut is coming, which I think will also help. And as those things start to get behind us, that gets really interesting for us.

All right. Thank you.

Yeah. Thank you. Thanks for the question.

[Operator Instructions] Okay. It appears we have no further questions in queue. We've reached the end of the question-and-answer session. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the Digital Brands Group Q1 2024 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John McNamara. You may begin.

Thank you, [ Holly ]. Good morning, everyone, and welcome again to the Digital Brands Group 2024 First Quarter Earnings Conference Call and Webcast. With us on the call this morning from Digital Brands is Hil Davis, Chief Executive Officer. Hil will begin the call with an overview of the quarter, and then we will open up the lines for questions. Please keep in mind this earnings call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth in contemplated by or underlying the forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements will prove to be accurate. With that, I'll turn the call over to Hil Davis. Go ahead, Hil.

Thank you, John. Good morning. Despite a timing shift in our wholesale shipments, which shifted revenue from the first quarter to the second quarter, we experienced a significant operating expense leverage. We expect this operating leverage to continue throughout the year. In fact, this operating leverage coupled with higher revenues result in higher flow-through to our operating and net income. Regarding the shift in wholesale, we had our fabrics, a majority of our fabrics get stuck in a shipment container at the L.A. port due to an X-ray check [indiscernible] of other products. So we lost 2 weeks there, which meant January shift in middle of February, middle of February shipped in middle of March and majority of March shipped into the April period, which is what impacted revenue, which is pretty significant if you kind of take the current revenue and divide by 2. And I think that's really something people need to pay attention to because we will pick that up, and we should ship the majority of June at the end as we -- the wholesalers have unkind this based on sell-through rates in their stores, and we do not expect that to happen again. It was just a one-off where U.S. customs flagged the container we were in. There was nothing we could do. We just had to wait until it went through its X-ray process, which we lost 2 weeks on and then everything was behind by then. By the way, from our -- as we move into the second quarter, not only do we benefit from that shift of March into April, we'll also shift benefit from our store, which opened in mid-April. We are experiencing healthy week-to-week revenue increases since we first opened the store, and we're excited to see where that goes as it continues to grow. And as we said before, we're just sending product down there that we already have. So we're not making product for the store, which is just basically no cost on that side. We also plan to benefit from additional e-commerce strategic decisions in the second half of the year on top of that. So in Q2, you're going to have the benefit of the store as well as the shift of March into April. And then you're also going to -- as you move through the second half of the year, our fall bookings are strong, coupled with some strategic e-commerce decisions we've made. So let's discuss the first quarter results. Net revenues were $3.6 million compared to $4.4 million a year ago. Again, as we mentioned, net revenues were negatively impacted by the wholesale shipments for March slipping into April, and then we expect to benefit from that in the second quarter of this year. The gross margin profit increased 48.1% compared to 45.5% a year ago. We expect that gross margin number to be higher as there are significant fixed costs such as pattern makers, solar, our fulfillment center, the pick-pack ship costs are all built in gross profit or cost of goods sold. So as the revenues are higher, so are the gross profit margins. G&A expenses decreased, $1 million compared to $4.5 million a year ago. This was 27.2% compared to 100.5% a year ago, and we expect to continue to benefit from these synergies since the Sundry acquisition. Sales and marketing expenses were $700,000 compared to $1 million a year ago, 19.8% versus 22% a year ago. And part of that, too, was the fact that the March e-commerce orders also been flipped into April as well. So really only 2 months of e-commerce in the Q1 numbers. Net operating loss was $225,000 compared to $3.7 million a year ago. What's interesting is if you look at what revenues slipped into the April period, we would have actually reported positive net operating income based on those results. Net loss was $684,000 or a loss of $0.46 per diluted share compared to a loss of $6.1 million or a loss of $27.8 (sic) [ $27.48 ] per diluted share a year ago, which is a significant improvement. In concluding, as we stated, the company would achieve significant operating leverage as we lap the first year of our Sundry acquisition. We expect this operating leverage to continue throughout the year on higher revenues, which will increase the flow through to the net and operating income. Additionally, given our results and given what we expect to achieve in Q2, Q3 and Q4, the Board will continue to achieve strategic alternatives given the continued dislocation between Digital Brands Group public markets and the intrinsic value of the company's underlying assets and operating performance. We have several options that we can pursue, all of which should increase shareholder value meaningfully. And we know based on inbound demand that are not -- what our Nasdaq shell is worth, which is significant. So we will continue to pursue this, especially, like I said, as we know what Q2 is shaping up to be in what Q3 wholesale orders are, the strategic alternatives, the store, et cetera. So thanks, everyone, for their time. We look forward to the continued momentum, and this concludes our first quarter 2024 earnings call. So let's open it up to Q&A, please.

[Operator Instructions] Your first question for today is from [ Mike Travlos ], a private investor.

General broad question, but what is the company's you say, competitive advantage or approach to the retail market? I mean, obviously, retailing is big and fragmented, but what's our angle here that we're playing with opening this one store and pivoting from e-commerce, so on and so forth?

Yes. Regarding that, I don't -- I wouldn't look at a one store is pivoting from e-commerce. I think it's one of those things where what we're seeing is you need to have wholesale, you need to have e-commerce. And then if stores work, you also need to have stores. One thing about apparel, unlikely a book or a glass or something along those lines is that it is physical touch, see, fill, fit matters. So I would just kind of keep that in mind. I think it's more you need to be in all the channels if the channels work. With e-commerce, the days of just rolling out unlimited ad spend is over. And so you're watching ROAs more closely and you're running a ROAS based campaign instead of just open to the right feet to meter campaign. And then wholesale continues to be strong for us. And then as far as the store, we had a lot of, like we said, products from Sundry alone that was just sitting there. So it's in an outlet location. We'll continue to monitor that and see what makes sense. And if it does make sense to open a full -- what they call a full retail store. And then if so, we'll pursue it. So we're just learning there. And then we took over at least, so it's a short lease. So it's only 3 years. So there's not a lot of obligation or liability there. So in terms of what differentiates us, I would say the big things are it's just going to be design and price point with Sundry. The Q1 of last year was their last really good quarter before the brand kind of rolled over. And we're lapping incredibly easy comparisons in Q2, Q3 and Q4. And so we expect to see that improve nicely. And what we did there is we sharpened the price point and brought in a new design team. Stateside, we continue to just grow that slow and steady, 20% a year, and that's basically driven on where the best price point at the women's contemporary market. And so that brand just gets more and more awareness and continues to build. And then we still is e-commerce only and Bailey's is predominantly licensing now. So it's really sharpening the price points, so where you're the best product at the best price and then good design. We brought in a new designer for both brands, basically fall of last year. So we're starting to see her product hit the store floors and sell-through. So that will benefit. And then I think that's really the big driver. It's just being smart about it, just not chasing growth, focusing on cash flow as much as you are top line growth. And again, top line growth in Q1 was significantly impacted by basically majority of March shipping in April. And then you've got -- so we get that benefit plus the store plus some other things. Does that answer the question? I know it's a little long winded just one of the kind of given for overview.

No, it does kind of new to the story, so I did want to hear something extensive. Second question, you had come out with a press release in the past somewhat recent about no equity raises in 2024, but you had some equity activity. I don't know if you call it a raise. So what's the situation?

Yes. So that was driven mostly by the Nasdaq sending us a delisting notice because our -- at the end of the year, we have to -- the auditors go through and now that accounting is predominantly all theoretical based and not actual based. As an example, you have to take all these noncash charges. As an example of that was, we had to take a $368,000 noncash income tax charge, because for GAAP accounting, we can potentially sell any of our brands at any point in the future, unknown, it could be a millennial for now. It could be a decade from now, it could be a year from now. No one knows. But this is what they say. And so they say, based on that, you need to take a tax consequence for that, which is kind of silly, because one thing I can guarantee is they don't know when and the number is going to be wrong, that they assigned to it, right? And so we had a lot of net noncash charges, which dipped us below, you'll see we're above it now. But what they -- the Nasdaq looks at 2 things. One is at the quarter, that's number one. And then number two is what they perceive as their -- your ongoing amount of burn and if you can maintain it. So we have our hearing coming up. And basically, based on our conversations with the Nasdaq, we knew we're going to be in compliance when we reported Q1 and but everyone felt that based on their comments and how they're reviewing all these things that we needed to show that with our burn in this additional capital, it would take us out of that risk, because I don't know we just -- it's one of those things where they said it's a 50-50 weight, 50% is if you're in compliance and the second is if they deem -- so completely subjective, if they deem that your burn will be able to be lower or will continue to maintain that shareholder equity. So that's what's driving that. So it wasn't driven by being staying listed on the NASDAQ.

So you just played it safe and just raised additional capital and if you don't need it, then you don't need it then?

That's right. Yes, sir. That's -- unfortunately, that's right. Exactly. And we went to the same thing last year because of this same issue. Now what's really important, too, is to keep in mind, as you move into the rest of this year, if you look at our interest expense line, you'll see that it's pretty meaningful. That majority -- not a majority, some of it rolls off at the end of Q2, because that debt's paid back. And then the majority of it will roll off in Q3, because that debt's paid back. So when you get into Q4 and then next year, that interest expense line is probably a 20% of what it is now. So we -- really, when you look at that, that's going to be pretty significant. And then secondly, next year, we also $1,000 a quarter in the state side, depreciation and amortization no longer running through the books. So we have to amortize the goodwill of all our acquisitions. So at the end of Q4 this year, it's $800,000 a year. So $200,000 will come back to the book starting in Q1 next year. So what's interesting is when you look at that just alone, Q1 next year, you're going to pick up probably $600,000 just in noncash interest expense, which is are amortized as well as the state side goodwill as well. So that will also be a benefit. Then in fact Q1 or Q2, but it does benefit the -- as we move forward, starting in Q4 on the interest expense side in Q1, both interest expense and goodwill.

So if you put all that stuff together, you anticipate being at least cash flow positive pretty soon? Not to ask you for guidance, but that's what you're anticipating.

Sorry, I don't know where I cut off on the -- on my last response.

You would have finished talking about the amortization and interest expense.

Yes. So you'll pick up probably $400,000 in Q4 and then you'll pick up over $600,000 in Q1 pretty much every quarter going forward, Q1, Q2 and Q3 of next year as well. So it's pretty meaningful as you really think about the earning shape of the company going forward, given the G&A leverage. So that will be a benefit as well to everything that's going forward.

So without giving formal guidance that you anticipate being cash flow positive very soon.

Yes, internal cash flow positive. That's right, exactly. And then from a pure GAAP perspective, yes, we would think we'd start approaching that as well just from a pure GAAP accounting perspective. Q4, you never know, because the problem is all these auditors are getting reviewed by the PCAOB as an example, like they were coming back when we were doing our annual and they were asking us to pull 1,000 invoices to prove that a zipper cost $0.05 and you're like, that's not even 1% of the product cost, which is not what they consider a significant event. So hopefully, we're done with all the -- our auditors being under PCAOB review, because it also just adds a ton of cost. So we -- being public cost of $600,000 in the first quarter alone. I mean it's pretty expensive.

And on a thing for the...

Yes, that's exactly right. That's exactly right. So we do think that will happen. And it will happen as we move to the second half of the year and then continue going forward.

Your next question is from [ Chris Werny ], a private investor.

Okay. So I have a PhD in statistics from Moscow State University. And I'm really excited because I've been analyzing the revenue and I think you could have a, like 1,000 to 5,000% increase in revenue in the next 2 years or so based on all the data I'm looking at. Are there any plans to develop a statistical probability model based on probability theory to actively analyze revenue?

We don't necessarily look at it that way, because we're -- you've got different revenue drivers. And on the wholesale side, you just don't know. You're showing a couple of months ahead, but the wholesalers buy based on what's happening in the market right now, so it's more emotional than it is anything else. So it's pretty difficult to predict that. And then as far as e-commerce, it's just steady state and just kind of -- especially now that it's ROAS based and the stores, you just got to -- you'll have to figure out how they perform. So I think it's probably a little bit harder because my guess is your variability factors will be a lot higher. So all your inputs will have a very high variable factor and/or standard -- wide standard deviations, which would make it harder. But I do think we are coming off the lowest revenue in the second half of last year. We're lapping that. Obviously, as we lap that, we're getting the interest expense back. And then as you move into next year, you get all the state side goodwill back and then you just continue to build the business. And then I think what people often underestimate is when you build small brands and you start building the customer base up, as those customers start to repeat, what ends up happening is you start to build the space that gets stair-step function higher. But once you guys start to get to certain levels, that stair-step function starts to become more of a higher slope and less of a stair step and more -- it's not a hockey stick per se.

[indiscernible] function. Okay. Now you're speaking my language.

Yes. So I think that's -- and we're still in that stair-step function space, because most of our brands are small. But what ends up happening is we're starting to see that stair-step function get a higher slope. And I think that's the big difference here is you're going to start to see that. And you see it all the time with brands like a sort of brand called J.Hilburn, that went through the same thing. It was just slow and steady and all of sudden you get into certain markets and you're a brand and then it goes up to the right, because there's a virality coefficient that happens when you get a certain amount of repeat customers in your customer base. So every quarter that goes by, you get closer and closer to that moment of virality basically based on just the number of customers in your base.

Wow. Awesome. I honestly -- I'm going to increase my personal price target in the next 2 to 3 years to probably a 10,000% revenue increase?

Yes. I can't comment on that, but I definitely think we have the ability to grow revenue. And I think a lot of it is just awareness, too. I mean, when you look at some of these bigger brands that are out there, even ones that aren't performing like Allbirds or you've got Warby Parker that's starting to perform. A lot of it is just they had a lot of money. They raised hundreds of millions of dollars in the private market, built a ton of brand awareness. They built a customer base that is basically repeats. And that's really what it is. All you're doing -- all they did was take the normal time line to growth and shrunk it by raising a lot of capital. We're obviously not raising that amount of capital. So our time line isn't as short as their's, but it's the same passing process.

Wow. I'm definitely a fan of Allbirds. I've heard from them, and I really like their shoes. I think they're very forward thinking and very unique functional and cool.

Yes, they've done a nice job. And they've raised a lot of money. They have stores. The stores will work for them, some have, some haven't. And I think that goes back to the original where it's Warby Parker stores are working better than Allbirds stores, but you never know. And we look at stores at other brands all the time. And we know that this formula works. You have stores, you have e-commerce and you have wholesale and that's -- and you kind of want a healthy mix there. And if you have all 3 of those ores in the water, then you end up building a good business because you're in all the channels. So that's how we kind of think about it.

Now what would you say to all the ridiculous haters who say, "Oh, you're a digital company and you're opening up physical stores, this will never work what garbage blah, blah, blah."

Well, I mean, Warby Parker, I think everyone would argue as a digital company as well, and they have over 170 stores. Allbirds is also a digital company. They have something like 65 stores, Marine Layer, digital company, they're private. I think they have over 40 stores, Buck Mason also a digital company, has over 27 stores. I can keep naming them, right? There's -- just because you're digital first, and that's how you're born or what you're doing, doesn't mean you ignore where you can drive revenue. So it's pretty lowbrow thinking or low IQ thinking. And I think what you have to realize, too, is like -- when I launched J.Hilburn, I was at Citadel Investment Group. I was covering restaurants retail. I covered Amazon and Jeff Bezos forever. And he always said that they struggled in apparel. That was the #1 category they struggled in. And if you look at the data today, where they do well in apparel, is basics. They don't do well with branded e-commerce. And the reason I always say is that apparel is touch, see, fill, fit. So Jeff Bezos, who's probably one of the smart people as you've ever seen, run a business.

That is the methodology. I have a theory that in the future, as time goes on, clothes will generally start to become brandless. People will just say, I want just the cheapest coolest denim possible, and I don't care what brand it is. As things start to go more online and online and more digital in the future, I think that's going to be a trend. And I got to tell you, I regret not buying Amazon stock in the '90s. I think I had some music land stock Yes. Wow.

But I think that's the key, right? I mean, even look at J.Crew. They were catalog. They started opening stores. Their revenues just went through the roof, right? Because then you go in, you're this size, you like this product, as you continue to keep that fit and make to that product quality, then they go online and buy. So I think what people miss is that in apparel, you acquire in the physical and you retain into digital, it's that simple. So the whole point is you need a good customer acquisition trap. And I think that's where wholesale comes in. And I think that's where stores come in and then your digital becomes the retention engine, right? And that's your profitability engine, too, because you're not spending as much to acquire a customer. So I think that's where people miss it. And again, I go back to -- I think everyone argue, Jeff Bezos a pretty smart guy, built a pretty big business. Go back and read all his case, his cues and his earnings report and his earnings call, and he will tell you they couldn't crack retail or apparel. So they can't crack apparel, and he's spending more money and more time against it than anyone in this room. And if you added all our IQs together, he's probably smarter than all that, too, that tells you a lot, right? So I think that's why you have to have all 3. So you can't look at it as just because you're digital first doesn't mean you're digital only. You can't be digital only, you can't be wholesale-only and you can't be store only. You have to have all the ores in the water at once. And that's just the reality of it. And the mixes will shift as the consumer shift, right? I mean during COVID, there were no stores to go into. So digital was massive. As people have come out of COVID, they want to shop. And so you need to follow the customer, you don't follow a business principle and say, "No, we're only digital. And the customer is wrong." They don't -- they want to shop in stores, but we're not going to do that because we're smarter than them. That's not a good recipe for success. But the problem is that people online are oftentimes sadly, one standard deviation thinkers. So they only think to that one piece and not like, "Oh, what would like if you do pull X, what happens in Y, Z and A downstream and how does that impact what you need to do."

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings and welcome to Digital Brands Group, Inc. Fourth Quarter and Full Year 2023 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce John McNamara, Investor Relations. Thank you, you may begin.

Thank you. Good afternoon everyone and welcome to the Digital Brands Group fourth quarter and fiscal year 2023 earnings conference call and webcast. With us on the line from management is Chief Executive Officer, Hil Davis. Hil will begin the call with an overview of the quarter and the full year, and then we will open up the line for questions. As usual, we would remind you that this call may contain forward looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth in these forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. With that, I'll turn the call over to Hil Davis. Go ahead, Hil.

Yeah. Good afternoon, everyone, and thank you, John. The fourth quarter was the end of Sundry's bottom, which our first quarter results will reflect as well as our Q2 wholesale bookings. Despite lower revenue contribution from Sundry in the fourth quarter, we almost achieved breakeven net income due to our cost savings excluding non-cash expenses. Based on first quarter wholesale shipments and second quarter wholesale bookings, we're excited to see revenue growth meaningfully re-accelerate. This increase in the revenue trend will be coupled with a significantly lower operating expense structure which you can already start to see in Q4 and you saw in Q3 which will accelerate in Q1 and going forward. So with that, let's discuss the fiscal year and fourth quarter results. Net revenues increased 6.8% to $14.9 million compared to $14 million a year ago. This excludes revenue from Harper & Jones as it was spun out in the second quarter. Please note that these results exclude the -- reference also for Harper & Jones for the third quarter ‘22 and ‘23. Importantly, this represents the lowest point of Sundry's wholesale revenues in the second half of 2023 versus the first and second quarter wholesale bookings for 2024. And also, please note that this includes some non-cash charges we had to take, which I'll discuss more in the fourth quarter numbers. Gross margin increased 10.2% to $6.5 million compared to $5.9 million. Gross profit margins increased to 43.9% from 42.5% a year ago, and this also includes significant non-cash charges that we took as part of the audit process, which we’ll not incur going forward. G&A expenses, including non-cash items, decreased 12.7% to $14.3 million compared to %16.4 million a year ago. G&A expenses excluding non-cash item expenses decreased 35.7% to $8.8 million compared to $13.7 million a year ago. The G&A expenses included $5.5 million in non-cash expenses associated with D&A and stock option expenses, a lot associated with the Sundry acquisition. Sales and marketing expenses decreased 18.5% to $4 million compared to $5 million a year ago. Sales and marketing expense ratio was 27.1% compared to 35.4% a year ago. Net loss per share attributable to common shareholders was $10.2 million or $20.46 per share compared to a loss of $38 million or $1,233.10 per share. Please note that the share count was only 422,000 shares on average during the fourth quarter and the year. So these numbers are significantly impacted by the low share count. Net loss excluding non-cash charges and add backs was $8 million compared to a loss of $28.8 million ago. Let me repeat that. The non-cash charges and add backs [dollar] (ph) loss was $8 million compared to a loss of $28.8 million a year ago. Net loss per diluted share, excluding non-cash expenses and add backs was $18.81 per share, compared to $934.38 per share a year ago. For the fourth quarter, the results are as follows. Net revenues were $2.8 million compared to $3.4 million a year ago. This includes the low point of Sundry's wholesale revenue based on our taking them over and changing the design team. And we've since seen a significant increase in first and second quarter wholesale bookings and shipments. This also includes a non-cash contra revenue adjustment of $0.7 million from the Sundry acquisition. Excluding these, net revenues would have been $3.5 million versus $3.4 million a year ago, despite the fact that Sundry struggled in the second half of this past year. Gross profit decreased zero point -- gross profit was $0.5 million compared to $0.6 million a year ago. This includes non-cash expenses of $0.3 million due to some write-downs that the auditors wanted us to take, mostly associated with the Sundry acquisition. Gross profit margins decreased to 18.3% from 19% a year ago, which again includes the non-cash expenses and the net revenues and cost of goods sold. Excluding these charges, gross profit margin would have been 43.5%. G&A expenses, including non-cash items, decreased 30.6% to $2.2 million compared to $3.2 million a year ago. I think this gives you an idea of our leverage on our G&A line and also what will happen as revenues accelerate given this lower G&A cost. Sales and marketing expense decreased 13.4% to $0.8 million compared to $1 million a year ago. Net loss per diluted share attributable to common shareholders is $3.7 million or $8.76 per share, which includes non-cash expenses. That's compared to a loss of $15.8 million or $511.54 per share. Excluding those non-cash charges of $3.1 million in the fourth quarter, all due to the audit, was compared is -- our net loss was $0.6 million, or $600,000, excluding non-cash charges. And that's compared to $19.2 million a year ago. And that's on substantially low revenue associated with the Sundry turnaround. Net loss per diluted share, which was 424,000 shares, so please keep that in mind, was $1.48 versus $621.22 a year ago. So as you can see, our revenues were negatively impacted by the contra revenue adjustments, cost of goods sold as well. And then when you back out all the audit non-cash charges that we took as part of the audit, we lost $600,000 on low revenue for us due to the Sundry turnaround. In concluding, we are excited to announce our first quarter earnings in May, which we believe show the strength of the business between wholesale shipments and bookings. We'll also have the preliminary results from our outlet store opening in Allen, Texas this weekend. As we have stated, 2024 is the year we expect to experience the inflection point in our business. Thanks, everyone, for their time. I do have one calling question that I would like to talk about. We got a question on why [we have to be] (ph) filing on Friday. The first reason in that it is good corporate governance. The second is, this was the last day of our 60 day lookback period, which we're able to catch the highest price of the -- of our stock ending that day. I think that's really important. We waited until the very last day to do it. And this gives us option value in case anything were to happen and we needed cash versus filing the next one. So it's good corporate guidance. We took advantage of the high price on the 60-day lookback period. And as investors, this is what you'd want us to do. The other option, I guess, is if we needed cash in two or three or four, six or nine months, we could file an S-1. But we thought this was a much better use of being able to take advantage of good corporate governance and a high lookback period price. With that, I'll open it up to the Q&A, please.

That's it. I appreciate everyone's time, and we'll talk very soon. Everyone have a good day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Thank you for standing by, and welcome to the Digital Brands Group, Inc. Q3 2023 Earnings Call. I would now like to welcome John McNamara, Investor Relations to begin the call. John, over to you.

Good afternoon, everyone, and thank you again for joining us on the Digital Brands 2023 Third Quarter Financial Results Conference Call. With us on the line from Digital Brands is Hil Davis, Chief Executive Officer. Hill will begin the call with a brief overview of the quarter, and then we'll open up the lines for questions. As usual, we would remind you that this earnings call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding among other things such as the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth by the underlying forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. With that, I'd like to turn the call over to Hill Davis. Go ahead, Hill.

Thanks, John, and good afternoon, everyone. We are now halfway through our fourth quarter, and we've also closed our first quarter 2024 wholesale bookings. Given the current trends of the fourth quarter and our first quarter wholesale bookings, we are pleased to announce that we have turned Sundry around. Sundry set their bottom in August, and it has been on a steady increase every month since then. For example, we have tripled Sundry's first quarter 2024 wholesale bookings versus the Brand's third quarter 2023 wholesale revenue, which again saw the bottom for both July and August. And ever since then, we've seen a significant increase. Additionally, Sundry's fall sweater sold out so quickly at wholesale that Anthropologie has asked for an exclusive sweater program for next fall and holiday, which will increase our wholesale revenues significantly versus not only our first quarter bookings, but our third and fourth quarter results of this year. In fact, other wholesale accounts have stated they under ordered for fall and holiday for Sundry given the products are selling out on their floor within weeks. Today, we just learned that another major retail chain and our largest wholesale account sold through 57% of Sundry's holiday sweaters in one week. That is correct, one week. They now also want to go deeper in their buy next year. The turnaround in Sundry, along with the increase in our revenue from our other brands, coupled with the cost synergies, has resulted in meaningful operating leverage. In fact, based on the increasing revenue trends and the decline in our operating expenses, we expect to be EBITDA-neutral in the first quarter. This assumes the current e-commerce trends as is, and these trends have been softer than we expected due to the soft macro environment that other retailers and DTC companies have reported. In fact, this is one of the most promotional periods we have ever experienced with promotions starting much earlier and at much higher discounts than we have seen in the past. And based on the other retailers that have reported earnings as well as my discussion with private companies, everyone is seeing and experiencing this, even including Home Depot today, Target, Levi's, Nike, et cetera. Despite these softer e-commerce trends, we still generated internal free cash flow in October -- which we used -- sorry, my EarPods died. Despite these softer e-commerce trends, we still generated internal free cash flow in October, which we used to pay down old accounts payable and debt. We expect to generate internal free cash flow going forward, and we will continue to clean up the balance sheet as this is what private investors have told us that they value the most. In fact, the monthly internal free cash flow should increase in April and again in October. The increase in October alone is over 60,000 a month, just due to the fact our office and distribution center rent will no longer include the catch-up payments due to the landlord from the COVID years where we paid no rent. Let me repeat that, just starting in October alone, we will pick up an additional $60,000 of free cash flow just from paying a normalized rent versus a rent plus old rent due from COVID. We are also finalizing a lease for an outlet store that would take over an existing outlet location that would open approximately March 1. The Brand in this store currently does $1.8 million a year, which is $150,000 a month. It costs approximately $45,000 a month to operate. And since we have a lot of old Sundry products from the acquisition, we will have no cash cost for our cost of goods sold. This should add a minimum of $50,000 to monthly cash flow, assuming the revenues dropped to $100,000 a month, which we do not expect, but it is a conservative scenario. If we maintain the same monthly revenue, then the cash flow should approximate an additional $100,000 a month on top of our current amount. Based on the $4.5 million in wholesale bookings, plus our e-commerce revenue plus store revenue plus wholesale reorders plus licensing income from our licensing deal, we expect to achieve EBITDA neutral to positive in the first quarter. And based on the Anthropologie exclusive sweater program alone, not to mention the feedback from other wholesalers, we should be meaningfully over that $6 million revenue threshold for the third and fourth quarters. So again, $6 million in quarterly revenue is EBITDA neutral. And again, based on our current wholesale bookings for Q1, which are booked and our purchase orders that are in our system and binding plus our e-commerce trends plus the store revenue from the outlet plus the wholesale reorders we get, plus our licensing income for the first and second quarter, we expect to be at a minimum EBITDA neutral and in third and fourth quarters nicely EBITDA positive. In short, we have, one, accelerating revenues, which should result in revenue growth of 50% plus in the first and second quarters and close to 100% in the third and fourth quarters. Secondly, internal free cash flow that is also increasing when we come to March and September and three, neutral EBITDA in the first half and EBITDA positive in the second half, which is also why our internal free cash flow increases. We believe these fundamentals and metrics do matter, and we will find the investors private or public who value these trends as we are clearly not getting any credit for them today in the public markets. So with that, let's discuss third quarter results. Net revenues increased 22.5% to $3.3 million compared to $2.7 million a year ago. Please note, these results exclude the revenue from our disposition of Harper & Jones for both the third quarter of 2022 and 2023. Most importantly, this represents the lowest point of Sundry's wholesale revenue based on our current fourth quarter trends and first quarter wholesale bookings. As Q1 2024 wholesale bookings are triple to the third quarter wholesale revenue, and that is also a reflection of the changes that we made when we acquired Sundry when we changed the design team and also changed our pricing and our fabric quality. We were not able to impact change until September, and we are actually seeing those results now play out very nicely. Gross margin increased 77% to $1.7 million compared to $1 million a year ago. Our gross profit margins increased significantly to 52.3% from 36% a year ago and also 52% from the second quarter. So we are holding and growing gross margin. G&A expenses, including noncash items, increased 25.3% to $3.7 million compared to $3 million a year ago. G&A expenses, including noncash items -- excluding noncash item expenses, decreased 30.8% to $1.6 million compared to $2.3 million a year ago. G&A expenses included $2.1 million in noncash expenses associated with depreciation and amortization, amortization of loan discount and stock option expense. Sales and marketing expenses increased 12.6% to $1.2 million compared to $1 million a year ago. Sales and marketing expense ratio was 35.3% compared to 38.5% a year ago. Net operating loss, excluding the noncash charge was $1.2 million compared to a loss of $2.5 million a year ago. So we cut our net operating loss in half on very low revenue. In fact, revenue that's significantly below just our Q1 wholesale bookings alone. Net loss per diluted share attributable to common stockholders was $5.4 million or $14.55 per diluted share compared to a loss of $4.9 million or a loss of $223.83 per diluted share a year ago. Net loss per diluted share, excluding noncash expenses, was $2.6 million or $8.92 per share. In closing, as we stated, the Board is reviewing strategic alternatives given the continued dislocation between Digital Brands Group public market value and the intrinsic value of the company's underlying assets and operating performance. We believe the first quarter 2024 wholesale bookings and the monthly internal free cash flow illustrate how significant this dislocation has become. We own an $18 million wholesale revenue run rate for 2024, and that does not include any revenue impact from our e-commerce revenue, our store revenue or our licensing income. Finally, we should generate more than $6 million in internal free cash flow for 2024. We have several options that we can pursue, all of which should increase shareholder value meaningfully. We know that there is significant demand for our NASDAQ sell as well. We're extremely serious about these options as it is crystal clear that we are not getting credit for our acquisitions or our revenue growth and the fact that we are generating internal free cash flow, and we will be EBITDA positive in 2024 on top of the significant internal free cash flow. And our internal free cash flow, as I mentioned, should increase as we move through 2024 based on the outlet store and the rent payments as noted earlier. All these do not seem to matter to the public markets at this time, which is why we are moving forward with the strategic alternative path. Thanks for your time, and we look forward to the continued momentum. This concludes our 2023 third quarter's earnings call, and let's open it up to Q&A, please.

[Operator Instructions]

And I have -- if no questions, I have a couple of questions that have come across the e-mail or social media as well.

There are no questions at this time, sir.

Yes. So let me -- a couple of questions we've gotten. One is do we expect our gross margins to continue at this level. And the answer is yes, we do. And there's a few reasons for that. And the biggest reason is there's a lot of fixed cost in our gross margin. So for instance, when we make the samples for the wholesale, our distribution center rent, our labor back there, [sowers], pattern makers, so there's a high fixed dollar amount. So as our revenues increase, we get leverage on that fixed cost. Additionally, we also expect to cut another $0.5 million in cost as we move through. Now this is in the OpEx line items. So we'll cut another $0.5 million in costs in kind of Q1 and going forward as well. And that's on an annualized basis. But we do expect gross margins to hold at this level or potentially increase as well, especially as we get into Q4 because we're able to leverage those fixed costs that are associated in our gross margin. The other question is, are we frustrated with where we are? And are we serious about going -- pursuing these strategic alternatives? And the answer is yes and yes. I mean it's clear, like I said, in the Board also same way that we're just not getting the appreciation for kind of the -- in turn we've built both in the business, the acquisitions we've made, the leverage we've created, the revenue growth and the internal free cash flow. And at this point, we are actively pursuing it. As everyone knows on the call, we don't issue a lot of PR. We did issue PR on this and it was very intentional, and we will continue to pursue this very aggressively. And we feel like at this point in time that we're just not getting credit for what we've built and the results we're achieving. And I think Q1 is a perfect example of that. And I think October free cash flow as well as the Q1 wholesale bookings and just the feedback we're getting from the wholesale accounts on how well our products are selling through now has really shown us that we need to find the best path for shareholders, and it does not seem like the public markets at this point might be that path. That's -- those were the major questions that I got, either e-mail or social media. So I guess with that, we can conclude the call.

I would like to thank our speakers...

Sorry, one more question I just got. Someone asked about the volume today and what's going on and what's happening with [indiscernible] prefunded warrants. And they have been exercising those prefunded warrants. They are almost frame clear of all of them, which I think has been creating a lot of volatility. But as part of the pipe deal we did in early September, as part of it, it was prefunded warrants that they could convert into common, which they've been doing over the last week and at this point, they should be mostly out of those. And I think that is also just created an overhang as I've gotten a lot of questions about that from investors, and that should be done or very, very close to being done at this point.

I would like to thank our speakers for today's presentation, and thank you all for joining us. This now concludes today's call, and you may now disconnect.

Greetings, and welcome to Digital Brand Group Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John McNamara. Thank you. You may begin.

Thank you. Good morning, everybody, and welcome again to the Digital Brands Group Second Quarter 2023 Earnings Conference Call and Webcast. With us on the call this morning is Hil Davis, Chief Executive Officer of Digital Brands. Hil will begin the call with a brief overview of the quarter, and then we'll open up the line for questions. This call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth strategy. Expressions which identify forward-looking statements speak only as of the date statement is made. These forward-looking statements are based largely on the company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond the company's control. Future developments and actual results could differ materially from those set forth and contemplated by or underlying forward-looking statements. In light of these risks and uncertainties, there can be no assurance that the forward-looking information will prove to be accurate. Company will be hosting a Q&A session at the conclusion as I mentioned. And with that, I will turn the call over to Hil Davis. Go ahead, Hil.

Yes. Thanks, John, and good morning, everyone. As we stated during our fourth quarter and fiscal year 2022 conference call, which was in mid-April, we would experience meaningful revenue growth and significant operating leverage with the acquisition of Sundry, which was completed December of 30th last year. As you can see from our second quarter results, we did experience significant revenue growth, and we also experienced operating leverage on every line item. In fact, based on our current wholesale bookings and our current e-commerce trends, our third quarter and fourth quarter revenues will be meaningfully higher than this quarter. Again, we have visibility into our wholesale bookings. These are orders that we're already shipping and at our place. And based on that, our revenues for the third and fourth quarter will be meaningfully higher than this quarter. Additionally, we will continue to show a higher level of cost savings in our third and fourth quarters as well versus this quarter, driven by combination of layoffs and redundancies that no longer have severance attached to them or just natural league as people left after we acquired Sundry. So we are only in the first inning of this structural shift in our business. As I stated earlier, we already know what wholesale bookings are for our third and fourth quarters, and we're already selling spring now and getting very strong feedback. In addition to that, we have the additional cost synergies we will experience and then you layer on our e-commerce trends, and it is very exciting to see how this is playing out. And none of the above that I just mentioned includes the benefits from our 2 new revenue channels that we will launch this fall, which are: one, our proprietary affiliate program; and two our multi-brand retail store. In fact, we've had to place a limit on the number of reps in the affiliate program and are now already building a waiting list. Keep in mind, I was able to double the revenue for J. Hilburn every year using this affiliate program, which took revenues from 0 to $55 million in 6 years. So as you can imagine, we are extremely excited about the virality and reach of this program, given that we are already on a waitlist. Additionally, we are back in the wholesale market with Bailey 44, and we've added several new reps that are showing the product for spring deliveries and are already receiving wholesale orders. We had no benefit from wholesale last year from Bailey 44. We also will receive our first license income check for Bailey 44 next week, which throws directly to the bottom line at almost 100%, and we are in discussions regarding another license deal with 1 of our other brands. As you can see, the second quarter improved for the revenue growth and the operating leverage we are achieving post to Sundry acquisition. And as a reminder, we will generate internal free cash flow on a weekly basis in October, all this will be incredibly transformative to us. So let's dive into the second quarter results. Net revenue increased 69.6% in the second quarter of 2023 to $4.5 million compared to $2.6 million a year ago. Please note that these results exclude the revenue from our disposition of Harper & Jones for both the second quarter in 2022 and in 2023. Gross margins for the second quarter of 2023 increased 40.4% to $2.2 million compared to $1.5 million a year ago. Our gross profit margins increased significantly to 52% from 42% a year ago, and we expect to continue to see an increase in our gross margin, especially as our e-commerce trends continue to accelerate. G&A expenses, including noncash items, decreased 4% to $4.1 million compared to $4.2 million a year ago. So you've got 69.6% in revenue growth and a decrease in your G&A expense. That shows the leverage we're getting. G&A as a percent of revenue declined to 90.7% from 160.1% a year ago. Please note that our G&A and expenses include $1.3 million in noncash expenses tied to depreciation and amortization -- amortization of a loan discount and stock option expense. Sales and marketing expenses decreased 20.1% to $1.1 million compared to $1.4 million a year ago. Again, revenues increased 69.6%, while our sales and marketing expenses decreased by $300,000. That's incredible leverage on this line item. Sales and marketing expense ratio was 50.9% compared to 89.3% a year ago. Income from operations was $9 million compared to a loss of $10.6 million a year ago. Net income attributable to common stockholders was $5 million or $0.38 per diluted share compared to a loss of $9.5 million a year ago, were a loss of $26.47 per diluted share. Our second quarter 2023 financial details are included in the company's Form 10-Q for the 3 months ended June 30, 2023. So in closing, we have stated since we went public, adding Sundry to the portfolio was our tipping point in terms of, one, our ability to scale revenue faster; two, reduce overhead and leverage fixed costs; and three, generate positive EBITDA and cash flow. Our second quarter results reflect that we are in the first inning of the tipping point. In fact, we will experience additional cost savings and synergies in our third and fourth quarter results as well as higher revenue base -- higher revenue in our third and fourth quarter just based on our wholesale bookings alone. None of the forecasts include the revenue growth, operating leverage and cash flow that the affiliate program will add in the fourth quarter and every quarter after that. In addition, we'll have the multi-brand retail stores and the Bailey 44 licensing income, which we are now receiving, our first check is next week. In summary, you have, one, accelerating organic revenue growth; two, new revenue channels launching in the fourth quarter; three, declining operating expense due to synergies; four, licensing income; and five, internal free cash flow in the fourth quarter. I think it's fair to say that we have turned the corner and are extremely excited about our near and long-term future. And with that, thanks, everyone, for their time. We look forward to our continued momentum, which we already know is coming and this concludes our second quarter 2023 earnings call. We'll open it up to Q&A, please.

So thanks, everyone, for joining the call. We hope that everyone can see the significant shift in our business model and the momentum we're experiencing. And as I said, we already have a wholesale bookings for Q3 and Q4 booked, and we're already selling into Q1. And we already know the operating leverage we're going to continue to get. So we're very excited about how we're going to continue to execute against our vision that we laid out at the IPO and the acquisition of the Sundry in December 30th was the game changer we needed, and I think you're seeing it show up every quarter so far and we'll continue to do so. So with that, thanks, everyone, for the time, and we look forward to talking on our next conference call.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Hello, and welcome to the Digital Brands Group, Inc. Q1 2023 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to John McNamara, Investor Relations. Please go ahead, John.

Thank you. Good morning, everyone, and welcome to the Digital Brands Group 2023 first quarter conference call and webcast. With us on the call this morning is Hil Davis, Chief Executive Officer of Digital Brands. Before we begin, we would remind everyone that certain matters discussed during today's call or answers that may be provided to questions, may constitute forward-looking statements as defined under Federal securities laws. These statements are subject to numerous conditions, many of which are beyond the control of the company, including those set forth in the Risk Factors section of the Company's quarterly report on Form 10-Q filed with the SEC. Copies of these documents are available on the SEC's website as well as on the company's website. Actual results may differ materially from those expressed or implied by such forward-looking statements. The company undertakes no obligation to update these statements for revisions or changes after the date of this call, except as required by law. With that, I'd like to now turn the call over to Hil Davis, CEO. Go ahead Hil.

Yes, thank you, John. As we stated during our fourth quarter and fiscal year 2022 conference call in mid-April, we experienced significant operating leverage with the acquisition of Sundry. To that point, our operating loss would've been only $250,000, excluding the non-cash expenses, and approximate $250,000 in Sundry expenses that we are no longer incurring since we completed the integration in late March. As you can see from our release, we experienced operating leverage on every line item, and we still expect to achieve some additional expense reductions going forward. Also, please keep in mind, our e-commerce revenue for both January and February was half our March e-commerce revenue as we transitioned to a performance marketing agency. Our e-commerce revenue has extremely high gross margin and requires very little additional operating expense to execute, so the flow through would've been extremely high. This is why we're excited for the fall as we have: one e-commerce in full force; two, higher price point items like leathers, sweaters, and outerwear; three, Bailey 44 generating revenue from the wholesale channel again; and four, distilled with the full product assortment versus limited and busted sizing in inventory. This is why we expect to achieve EBITDA positive this fall, which, by the way, is only three months away. In addition to that, we are also excited about our two new revenue channels that we will launch this fall. The first is our proprietary affiliate program, which we have been building a founding group of influencers and affiliates for the soft launch in August. We believe this is an extremely scalable channel based on my past experiences and the positive reception we are experiencing. The second is our multi-brand retail store strategy. Based on the success with existing DTC brands with their own retail stores, coupled with the success of our multi-brand website, we believe that we can operate 50-plus stores in Tier 1 locations. We have seen the revenues of our peers in these locations, and they are generating between $2 million to $4 million plus per store and are profitable at the store level. Again, this is 50 stores times $2 million to $4 million in revenue per store. We will use our free cash flow this fall to ramp our store growth and expect to add 5 plus stores a year for the next few years and accelerate it after that. We believe both channels will increase our e-commerce and wholesale revenue as these channels will increase brand awareness and customer acquisition. And we believe our membership program, which will launch in the second half of June, just a few weeks away, will drive customer retention and repeat purchases. To that point, we are creating e-commerce-only monthly drops like the sneaker business that will only be available to members and will be offered at special member pricing, which will not include a wholesale markup. The customer value proposition is very strong. As you can see, the first quarter was proof of the operating leverage we can achieve and a clear and short path to profitability. So with that, let's discuss the first quarter results. Results for the first quarter are as follows: Net revenues increased 48.4% in the first quarter of 2023 to $5.1 million compared to $3.4 million a year ago. Please note, we did not receive the full benefit of the e-commerce revenue in January and February as we had to reduce Digital's advertising spend associated with the transaction -- transition to performance marketing agency. Gross margin profit for Q1 2023 increased 113.9% to $2.4 million compared to $1.1 million a year ago. Our gross profit margin increased significantly to 47.9% from 33.2% a year ago. G&A expenses, including noncash items, increased 8.4% to $4.6 million compared to $4.3 million a year ago. G&A as a percentage of revenue declined to 91% from 124.6% a year ago. Most notably, G&A expenses included noncash expenses of $3.1 million compared to $1.8 million a year ago. These are detailed in our free cash flow statement -- or on our cash flow statement on our press release and in our 10-Q. Excluding these noncash items, G&A would have been $1.6 million compared to $2.5 million a year ago which as a percent of revenues declined to 30.4% from 72.6% a year ago. Sales and marketing expenses increased 7.2% to $1.1 million compared to $1 million a year ago. That's a 7.2% increase in sales and marketing versus a 48.4% increase in e-commerce or total revenue. Sales and marketing expense ratio was 21.9% compared to 30.3% a year ago. Our loss from operations declined to $3.6 million compared to a loss of $5.6 million a year ago. Excluding the noncash items and G&A expenses, loss from operations declined to $500,000 compared to a loss of $3.8 million a year ago. Let me repeat that. Excluding the noncash items and G&A expenses, loss from operations declined to $500,000 compared to a loss of $3.8 million a year ago. And please note that these losses included approximately $250,000 in expenses associated with the integration and timing of the Sundry transition, which will no longer be incurred as they have been transitioned into our Vernon facility and the Sundry headcount is lower today than it was at the acquisition. Net loss attributable to common stockholders was $6.2 million or a loss of $1.08 per diluted share compared to $7.8 million or $59.18 per diluted share a year ago. Excluding the noncash items from G&A and other income, net loss would have been $2.4 million or a loss of 42% per diluted share compared to a net loss of $6.1 million or a loss of 40.577 cents per diluted share a year ago. Our first quarter 2023 financial details are included in the company's Form 10-Q for the three months ended March 31, 2023. In closing, as we have stated since we went public, adding Sundry to the portfolio was our tipping point in terms of: one, our ability to scale revenue faster through new channels in e-commerce; and two, generate positive EBITDA and cash flow, which will in turn allow us to invest in our growth channels at an accelerated rate. So this is a major tipping point and the first quarter results were the first and smallest benefit and proof of concept from our Sundry acquisition. We expect the tipping point and the benefit and the proof of concept to only accelerate as we move into the fall. We are excited for the forecasted monthly free cash flow that we should generate this fall associated with: one, positive EBITDA; and two, the end of our MCA payments in early October. We should generate over $500,000 in free cash flow monthly starting after our last MCA payment in early October. We will use this free cash flow to accelerate the growth channels that are generating strong returns as well as potentially buying back shares if that is the highest and best use of capital. We should have the cash flow to pursue both our accelerated growth strategy and a share buyback program, if that is the best use of capital and creates the highest returns. And at these levels, obviously, this dual approach would be the best case for shareholders. Thanks, everyone, for their time, and let's open it up for questions, please.

Yes. Well, thanks, everyone, for attending the call. And I think the key thing here is we talked about the Sundry acquisition being the tipping point. I think the first quarter results prove that. I think what's most exciting as we look forward, not only do we have our current growth drivers, we've got the affiliate program, we've got store growth, we've got significant cash flow, and we'll use that to not only accelerate that; but like as we said, at these levels to buy back shares and drive shareholder return. I appreciate everyone's time, and have a good day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.